EUR/JPY advances to near 162.00 as Euro receives support from real money flows

• EUR/JPY rises as the Euro gains support from real money flows, with investors hedging Dollar exposure or repatriating US assets.

• The European Central Bank is expected to implement a 25-basis-point rate cut on Thursday.

• The Japanese Yen benefits from safe-haven demand amid growing concerns over the economic impact of potential new US tariffs.

EUR/JPY rebounds after two consecutive sessions of losses, trading near 162.00 during Wednesday’s European hours. The currency cross strengthens as the Euro (EUR) gains traction against its peers, supported by real money flows as investors hedge Dollar exposure or repatriate US assets.

ING FX analysts Francesco Pesole and Chris Turner remarked that “We are not major subscribers to the dollar having permanently lost its safe haven status, but acknowledge that lower US growth rates are coming and that Federal Reserve easing in the second half will hit the dollar broadly."

However, further gains in EUR/JPY cross may be constrained as expectations of a European Central Bank (ECB) rate cut limit the Euro’s upside. Markets anticipate a 25-basis-point reduction on Thursday, which would lower the Deposit Facility Rate from 2.5% to 2.25%, following two previous cuts this year.

Investors will closely monitor ECB President Christine Lagarde’s press conference for insights into the central bank’s policy trajectory and the potential repercussions of US tariff actions on the Eurozone economy.

Meanwhile, safe-haven demand boosts the Japanese Yen (JPY) as concerns grow over the economic fallout from potential new US tariffs. In the latest trade policy development, President Donald Trump has ordered an investigation into imposing tariffs on all US critical mineral imports, many of which originate from China.

Bank of Japan (BoJ) Governor Kazuo Ueda, in an interview with the Sankei newspaper, acknowledged the growing risks associated with US trade measures, stating that a policy response may be necessary. Ueda noted that the evolving situation is increasingly aligning with the central bank’s anticipated negative scenario, already affecting business and household sentiment.